Movements of the Supply Curve - 26 |
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The supply curve is an upward sloping curve. This illustrates the assumption that a firm will
supply more of a good or service, if the price per unit rises. If price rises then
profits can rise as well.
A change in price causes a contraction or expansion of supply. These, as you will
recall, are movements along a given supply curve.
The supply curve can shift (a movement of the whole curve, to the right or left) for
a variety of reasons.
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Key Concept : The supply curve shifts to the left or the right if
all firms operating in the market are effected by the change in market conditions.
Supply can increase (a shift of the whole curve to the right) if new technology
is developed, that reduces the cost of production. Before the improvement in technology, this
firm could supply Qo of a good at price Po.
Adapting the new technology has lowered production costs. Now the firm can supply
Q1 at price Po, and still make a profit. |
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